Workshop Policy Lab for Sustainable Procurement 2 RIDF 2021 : UMKM Challenges in Accessing the Procurement Market

JAKARTA – As the fourth most populous country in the world, Indonesia is projected to have a demographic bonus by 2030. A survey from the World Economic Forum noted that up to 35.5% of Indonesians between the ages of 15 to 30 said they want to become business owners; the highest figure noted in the ASEAN region.

“The large potential of the workforce and our economic strength must be supported by a conducive business climate that accommodates business activity. In the government’s 2020-2024 Mid-Term Plan (RPJMN), the Ministry of Small and Medium Enterprises (UKM) and Cooperatives (KemenkopUKM) has already outlined a plan that will help strengthen the economy and ensure quality and fair growth, with the target indicator being a national entrepreneurship ratio of 3.9% in 2024 and entrepreneurial growth of up to 4% in 2024,” explained the KemenkopUKM’s Head of Business and Industry Role Strengthening and Education Division Elvira Rosa during the Policy Lab for Sustainable Procurement (PLSP) Road to Indonesia Development Forum (RIDF) 2021 workshop on Wednesday (6/10).

Elvira noted that this target is achievable if stakeholders work with each other, particularly the central government, regional government, educational institutions, incubator facilities and others.

According to Romy Cahyadi, CEO of Interstellar and part of the PLSP working team, UKMs hold an incredible role in strengthening Indonesia’s economy. UMKMs hold four key roles that are able to help the economy develop the local level.

The first is that UMKMs have the potential to generate significant contribution to the national income. The second, UMKMs are highly active in key sectors for green-based growth as several UMKM sectors have their own concerns regarding tackling environmental issues. Of the many UMKMs that operate in social entrepreneurship the three biggest sectors include the creative economy, agriculture and fisheries and education sectors.

The third is that UMKMs are able to address inequality through their social impact. In terms of ownership, a large number of UMKMs are owned by female businesspeople who hold big roles in their communities. The fourth is that the untapped potential of the economic sector, as there is still a lot of room for UMKMs to increase their productivity, improve their global market integration and improve research & development.

“The government’s role is to provide support in the form of creating policies that are beneficial to the UMKM sector, including the draft National Entrepreneurship Law, the UMKM Go Online program and the One Million Domains and 100 Digital Startups programs, as well as the plans outlined in the 2015-2035 National Industrial Development Masterplan and the 2011-2025 Masterplan for the Acceleration and Expansion of Indonesia’s Economic Development. All of these things will help UMKMs develop faster,” Romy said.

He added that other challenges faced by UMKMs in Indonesia include how they can upgrade their business scale and improve market access and how to get easier access to financing.

“First of all, market access is often hindered by informality and a lack of business model validation, lack of publicity or marketing schemes and others. The second obstacle, access to finance, is a result of a low level of financial inclusion and management, collateral requirements and burdensome regulations that threaten to hinder the UMKM’s growth,” Romy explained.

Taking place over three days, from October 5 to October 7, the PLSP Workshop, which is also attended by ministries/agencies and local government representatives, offers an opportunity for key ecosystem stakeholders to contribute towards setting the policy agenda, improving policy implementation and making recommendations to improve policy targeting. Collaborations across stakeholder groups, including policy practitioners that support UMKM organizations, are very important in jointly shaping Indonesia’s policy landscape and creating a conducive and supportive policy climate for UMKMs.

The PLSP Workshop also aims to identify challenges in policies related to eco-inclusive UMKMs to develop prototype solutions to the challenges faced. This program is expected to be able to produce strategic recommendations and implementation patterns that can be used in the future by both regional and national policymakers, as guidelines for sustainable development and further UMKM growth efforts.